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Executives

Paul Carrico - Chief Executive Officer, President and Director

Gregory Thompson - Chief Financial Officer and Principal Accounting Officer

Martin Jarosick - Executive Director of Investor Relations

Analysts

Charles Neivert - Dahlman Rose & Company, LLC

Bill Hoffman - UBS

Bill Hoffman - RBC Capital Markets, LLC

Jeffrey Zekauskas - JP Morgan Chase & Co

Andrew Cash - UBS Investment Bank

Frank Mitsch - BB&T Capital Markets

Roger Spitz - BofA Merrill Lynch

Georgia Gulf (GGC) Q1 2011 Earnings Call May 5, 2011 10:00 AM ET

Operator

Good morning. My name is Sylvia, and I will be your conference operator today. At this time, I would like to welcome everyone to the Georgia Gulf First Quarter Financial Results Conference Call. [Operator Instructions] Thank you. Mr. Jarosick, you may begin your conference.

Martin Jarosick

Thanks, Sylvia, and good morning, ladies and gentlemen. Thank you for participating in today's conference call to discuss Georgia Gulf's 2011 first quarter financial results.

There are slides available to you on the Georgia Gulf's website. These slides are for your reference, but we will not be speaking directly to the bullets on each slide.

Participating on today's call are Paul Carrico, President and Chief Executive Officer; and Greg Thompson, Chief Financial Officer.

During this call, we will be making forward-looking statements. As you'll appreciate, any business projections and assumptions about future events are subject to risks and other factors that could cause actual results to differ materially from our current outlook. A listing of factors that could affect future results is included in our 2010 Form 10-K.

Any forward-looking statements made on this call should be considered in light of those factors. In addition, during this call, we may refer to certain non-GAAP financial measures. We have provided a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measure as an appendix in our slides posted on the website.

I'll now turn the call over to Paul to begin the review of the first quarter. Paul?

Paul Carrico

Thanks, Martin, and good morning, ladies and gentlemen. We really appreciate you joining us this morning.

The first quarter results were a strong start to our 2011 fiscal year. Sales revenue increased by 25%, and adjusted EBITDA moved up measurably from the same period last year, as we realized $59.1 million this year versus $13 million for the same period last year. Recovery in the chemicals industry, and in particular our Chemicals division, continues to be strengthened by the advantaged position of North American energy cost.

On a Btu basis, the cost advantage of natural gas versus oil, provides a solid foundation for us to compete in the global petrochemicals market. We expect this advantage to continue for at least the next several years. And these conditions will favorably influence the operating rates in our Chlorovinyls chain, regardless of the pace of the domestic economic recovery.

Georgia Gulf is in a very good position to take advantage of the shift in the global market. We have worldscale capacity manufacturing plants located in the Gulf Coast, with excellent access to raw materials, as well as transportation for domestic and export sales.

Counter to the strong operating conditions in the chemicals area, the North American housing and construction markets remain at trough levels this year. Raw material price increases and weaker volumes challenged our margins in the Building Products segment. But we are confident in the recovery of value here as housing returns to more normal levels. On a positive note, our sales grew due to the acquisition of Exterior Portfolio.

We are managing the total Building Products business to take advantage of the eventual recovery in both the economy and the housing. The integration of Exterior Portfolio into our siding business is on track. We recently introduced Exterior Portfolio's solid core premium siding in our Canadian distribution centers.

Switching back to our discussions on chemicals, I'd like to update you on our reduced capacity operations in Plaquemine and the PVC force majeure we announced April 14. Over the 4- to 5-week period leading up to the announcement, we experienced several outages briefly, mostly due to weather and electrical interruptions. These events occurring in such a short time frame accelerated the degradation of components in our Chlor-alkali facilities, that are designed for periodic replacements.

The end result was that we took one of our 3 caustic chlorine cell lines down for repairs. The required repairs are not complicated, but they are very time consuming. Repairs are preceding more quickly than we originally estimated due to some strong efforts by our operations group to resolve the issue. We now expect to be back to full chlorine operating rate sometime in early June, and to increase our allocations for PVC throughout June and then come off the PVC force majeure in July.

Based on this timeline, our operating rates will be reduced by approximately 2% to 3% for PVC, and 4% to 7% for Chlor-alkali due to the downtime. We have taken the opportunity during this outage to increase our ability to recover more quickly from this type of outage in the future.

So now let's turn back to the specifics of our most recent quarterly results. As I previously mentioned, we delivered $59.1 million of adjusted EBITDA compared to $13 million of adjusted EBITDA in the first quarter of 2010. For the first quarter, the Chlorovinyls segment generated $52.2 million of adjusted EBITDA compared to $4.9 million in the first quarter of 2010. The improved results here for this quarter were driven by: first, higher ECU values; second, improved PVC performance. The sales volume improved and PVC price increases kept pace with ethylene cost. This was really a sharp contrast to the first quarter of 2010, when PVC price increases did not keep up with ethylene increases.

And finally, we did have 2 turnarounds in the first quarter last year, but no turnarounds this year. Our Building Product segment generated a negative $4.2 million of adjusted EBITDA in the first quarter of 2011 compared to a $5.3 million of adjusted EBITDA in the first quarter of 2010. This decline was a result of higher raw material costs, which were difficult to pass along in a tough market and lower volumes.

Volumes in the first quarter of 2010 were boosted by tax incentives that expired last summer. And as a result, we expect to see weaker volumes in the first half of 2011.

And finally, our Aromatics segment reported $20.1 million of adjusted EBITDA. This compares to $10 million of adjusted EBITDA in the first quarter of 2010. The improvement was driven by inventory holding gains caused by raw material price increases across the quarter, as well as higher volumes. Aromatics industry conditions continue to improve. The effect of industry operating rates moved higher than last year due to significant turnarounds in the industry. Even our own Cumene and Phenol units took turnarounds in April.

At this time, I'll turn the call over to Greg to review our financial results in greater detail.

Gregory Thompson

Thank you, Paul. Good morning, ladies and gentlemen. Net sales in the first quarter were $787.9 million, an increase of 25% over the same quarter last year. The increase is primarily due to higher sales prices and higher volumes in Chlorovinyls and Aromatics.

Let's look at our operating performance during the first quarter. We reported operating income of $36.6 million for the first quarter of 2011 compared to an operating loss of $10.5 million during the same quarter the previous year. The operating income from the first quarter of 2011 includes a reversal of a non-income tax reserve, partially offset by Exterior Portfolio acquisition costs and inventory purchase accounting adjustment for a total net benefit of $2 million.

SG&A expense for the first quarter of 2011 was $38.5 million compared to $37.9 million in the same period last year. This is lower than our quarterly guidance for SG&A due to a $4.4 million benefit from the reversal of a non-income tax reserve I previously mentioned. This benefit was more than offset by $3.9 million increase in compensation costs, primarily related to the reinstating 401(k) benefits for all of our employees midyear 2010, and a $3.7 million increase from the acquisition of Exterior Portfolio, which included the acquisition deal costs.

Our net interest expense for the first quarter was $16.5 million compared to $17.8 million for the first quarter of last year. For the first quarter, we reported tax expense of $7.4 million, driven by a higher level of U.S. pretax income. The effective tax rate for first quarter was 38%. Our effective tax rate is driven by our full year forecast for taxable income in the United States and Canada and a number of small adjustments.

For the full year, we expect the tax rate to be approximately 30% to 35%. But please be aware that this estimate is highly sensitive to how much of our projected taxable income is earned in Canada versus the U.S. and to certain other tax assumptions related primarily to our tax reserves arising from the acquisition of Royal in 2006.

In the Chlorovinyls segment, first quarter 2011 net sales increased to $326.3 million from $287.7 million during the first quarter of 2010. The segment posted operating income of $37.7 million compared to an operating loss of $8.7 million during the same quarter in the prior year. The increase in both net sales and operating income was primarily due to higher caustic soda sales prices and higher PVC sales volumes compared to the first quarter of 2010.

In the Aromatics segment, net sales increased to $304.1 million for the first quarter of 2011 from $190.7 million during the first quarter of 2010. The increase was primarily due to higher sales volumes, and prices for all products.

During the first quarter of 2011, the segment recorded operating income of $19.8 million compared to $9.6 million during the same quarter in 2010. The increase in operating income was primarily due to inventory holding gains that resulted from raw material prices increasing throughout the quarter and the significant increase in sales volumes for all Aromatics products.

In the Building Product segment, net sales were $157.5 million for the first quarter of 2011, 3% higher compared to the $153.1 million recorded during the same quarter in the prior year. The recently acquired Exterior Portfolio business contributed $12.4 million of sales from February 9, 2011, through March 31, 2011. Net sales on a constant-currency basis, excluding the Exterior Portfolio acquisition, declined 8%.

The sales decline was primarily driven by lower sales volumes in the first quarter of 2011 compared to higher volumes in the first quarter of 2010. The higher volumes in the first quarter of 2010 were driven in part by housing and construction-related tax incentives available in both the United States and Canada, which expired at various times after the end of that quarter.

The segment's operating loss was $12.1 million for the first quarter of 2011 compared to a $3.7 million operating loss during the same quarter the prior year. The increase in operating loss was primarily due to a change in the geographic sales mix, and higher raw materials conversion and selling costs. The operating loss for the first quarter of 2011 includes a reversal of a non-income tax reserve, Exterior Portfolio acquisition costs and inventory purchase accounting adjustments, which all result in a net benefit of $1.2 million.

The total FIFO impact for the first quarter of 2011 was positive $14.8 million, with about 2/3 of the FIFO impact in the Aromatics segment with the rest mainly in Chlorovinyls. In the first quarter of 2010, the FIFO impact was positive $13.7 million, with 2/3 in Chlorovinyls and 1/3 in Aromatics.

Now let's discuss working capital. We define controllable working capital as accounts receivable plus inventory less accounts payable. As you know, we invest working capital in the first half of the year, and recover most of that working capital injection in the second half due to the normal seasonality of our businesses. Compared sequentially, controllable working capital increased by about $95 million since December 31, 2010.

This sequential increase was driven by higher sales, normal seasonality in our business and the acquisition of Exterior Portfolio. On a days basis, we actually reduced average working capital by about 4 days compared to the fourth quarter. Compared to the first quarter of last year, controllable working capital increased by $92 million, driven by the 25% increase in sales. On a days basis, we reduced average working capital by about 3 days compared to first quarter of last year.

On the cash flow statement, you will note that we consumed $76.6 million cash in operating activities as compared with the use of $42 million for the first quarter of 2010, mostly as a result of the higher sales volumes and prices and the related increase in working capital I just mentioned.

Capital expenditures were $10.9 million for the first quarter of 2011 compared to $11 million in the first quarter of 2010. This results in negative free cash flow from operations of $87.5 million for the first quarter compared to $53 million of negative free cash flow in the first quarter of 2010. This was higher than last year due to the significant revenue increases we experienced in the first quarter.

For the full year, we still expect to generate free cash flow from operations in the range of $60 million to $120 million. And additionally, during the quarter, we spent $71.6 million to acquire Exterior Portfolio. As we have mentioned previously, our primary uses for excess cash flow are to pay down debt and fund accretive growth. In early April, we redeemed the remaining $22.1 million balance of our 2013 and 2014 senior notes.

Now I will turn the call back over to Paul for our 2011 outlook.

Paul Carrico

Thanks, Greg. Before we begin the question-and-answer session to this call, I wanted to briefly review our assumptions at the beginning of the year and how they measured up to the market and cost conditions we actually experienced.

First, the 2011 housing starts were expected to increase by about 10% to 15%. In Canadian, housing starts to decline by about 8%. So far this year, we have seen the expected decline in Canada, but no visible signs of recovery in the U.S. Relative to natural gas, our forecast assumed the price would remain relatively flat to 2010. For 2011, it has been in the range around $4.50 per million consistent with our expectations.

So far this year, caustic prices have been higher than our original assumptions and we expect them to remain favorable to our original assumptions for the rest of the year. For PVC, we expect operating rates near or above 90% for much of the year, driven mostly by strong export demand to keep upward pressure on sales prices. Our operating rate in the first quarter was just under 90%. For the full year, we expect to be above 90%, even with a loss reduction from our current limitations at Plaquemine.

We begin the year expecting PVC margins to improve modestly over 2010. In the first quarter, PVC export prices rose sharply, and we expect the domestic PVC price increases announced for April and May to be fully implemented. Assuming no significant additional increases in ethylene or chlorine, we now expect better PVC margins than our original forecast. However, PVC margins are still below reinvestment economics, so we do believe there's a need for further margin expansion, long term.

In 2010, our Aromatics business, along with the industry, really began to recover from a nearly decade-long trough. This strong performance has continued into 2011. We originally expected Aromatics volumes and margins to soften in midyear 2011, once all the industry outages were completed and supply returned to the market.

For the second quarter, our volumes will be reduced by the turnaround we just completed, but we now expect sales volumes and margin levels to remain at our current level for the remainder of the year, excluding the impact of inventory holding gains and losses.

Based on these revised assumptions, including our current estimates for the cost and timing of repairs to our caustic chlorine facility, we now expect 2011 adjusted EBITDA to be between $275 million and $295 million.

Now I'll turn the call over to the operator, so we can take your questions.

Question-and-Answer Session

Operator

[Operator Instructions] Your first question comes from Frank Mitsch from BB&T Capital Markets.

Frank Mitsch - BB&T Capital Markets

Yes, that's a nice raise in your 2011 EBITDA guidance. I think before it was, what, $2.45 to $2.65. And you are guiding to the high end there.

Gregory Thompson

That's right.

Frank Mitsch - BB&T Capital Markets

As you look at the first quarter, my sense is that Building Products probably came in lighter than expected. And perhaps based on your original guidance, maybe the whole first quarter may have come in a little bit lighter than expected. Is that a fair characterization? And along the lines of Building Products, I know that you articulated a good case as to why the volumes were down, but is there anything preventing you -- I know, that you're facing raw material inflation from higher PVC and higher additive prices. Is there anything holding you back in terms of being able to raise prices in that business to try and offset some of that?

Gregory Thompson

Yes, Frank, let me tackle the first part of that. Relative to overall on the quarter, we're actually a little bit ahead of our budget. So about where we, maybe a little bit better than we expected to be, mainly because the Aromatics performed better than we expected. However, some of that was offset in Building Products just because of volume's top line. I think in both U.S. and Canada, it's been a little bit weaker than we expected the first quarter of the year. But we always expected overall for Building Products that the first half of this year would be a tough comparison versus the first half of last year, just because of all the tax incentives and other incentives that existed that pulled some demand forward in Building Products this year. But it was, considering all of that, it was -- Building Products was certainly a little bit weaker. But overall, we are a little ahead of where we expected to be in the first quarter. And that's why we've taken up our guidance for the full year, as Paul mentioned to the $275 million to $295 million. And you're right, we were at $245 million to $265 million was our guidance at the beginning of the year. And then when we put out the force majeure announcement a few weeks ago, we said we still expect it to be at the top end of that at that point.

Paul Carrico

And then relative to your second part on the question about prices. To us, there's really not much doubt that with the increases in resins cost and additive cost and the need for some margin in these businesses, that prices will have to be increased. I think the only concern we have is that there might be a little bit of a lag between actually realizing those increases and getting them into the system and being realized in the market.

Frank Mitsch - BB&T Capital Markets

So that's, what, a second-half event rather than a second-quarter event in terms of realizing the overcoming those lags?

Paul Carrico

Well, that varies a lot, but no, I hope it starts in the second quarter and realize some of that into the third and fourth. But that varies a lot with people's contracts and agreements. So there's no real clear-cut answer to that one.

Frank Mitsch - BB&T Capital Markets

All right. Great. And then lastly on Aromatics, you mentioned that you have a turnaround. I'm wondering what -- if you could size the impact of that turnaround here in the second quarter? And one of the things that I was very struck by on Dow Chemical's release, is that they talked about how strong the Phenol market was. I'm assuming you're seeing the same thing, such that although much of the year-over-year gains was related to FIFO impact that you're actually seeing underlying fundamentals support, higher profitability there as well.

Paul Carrico

Yes, I don't think we're in a position right now to characterize the total impact. It certainly will be measurable. We have both the Cumene and the Phenol plants down for some number of weeks. In terms of the overall industry though, there's definite strength in Phenol on a global basis, continuing, I'll say, tying this to shortage when you look at both the U.S. and the Asian demand. And that's a condition, which has a chance of continuing in for the next couple of years.

Frank Mitsch - BB&T Capital Markets

All right. Terrific.

Operator

Your next question comes from Andrew Cash from UBS.

Andrew Cash - UBS Investment Bank

Just a couple of questions. Going back to your Investors Day, you had mentioned that you had some ethylene contracts that were rolling over, coming up for renewal. The ethylene players out there are announcing a lot of new plans, they're feeling their oats, talking about condo crack and all that. I'm just wondering, as you kind of weigh it out the big picture, do you think that your cost position will stay the same, be better than or worse than where it is today as these contracts are renewed?

Paul Carrico

Having worked in the ethylene industry many, many years ago, I appreciate the euphoria that gets generated in these kinds of conditions and maybe this is even a longer lasting one because of the global competitiveness that North America has. But you have to think there's some cyclicality to all of this, and for us to speculate about where we'll be 2, 3 years down the road is very challenging. I guess, I go back to what I said before is I think that being such a very large consumer, to the tune of 1.5 billion type of range capacity on ethylene, it should give us a good position to discuss with suppliers in future years and get the types of contracts we need to be competitive. And also that being said, we don't have to have the integrated margin on the ethylene from the Chlorovinyls position, we have to have competitive pricing. It's important that we avoid the spikes and the other anomalies in the market that create the unusual condition. So we're still optimistic, but that's something that's got to be played out over the next couple of years.

Andrew Cash - UBS Investment Bank

Okay. And then turning over to Building Products. Is it fair to say that the comps in the second half, you're talking about things getting a little bit better in the second half. Do you think the comps in the second half would make up for any of the negative variance that you might see in the first half?

Gregory Thompson

Yes, I think it's hard to say how the markets will behave. But yes, I mean, overall we're expecting to have continuing sequential improvement year-over-year in Building Products. So I guess naturally, that would say that we'll be quite a bit better second half this year versus second half last year. So that continues to be our expectation and that's what we've baked into our updated increased guidance.

Operator

Your next question comes from Jeff Zekauskas from JPMorgan.

Jeffrey Zekauskas - JP Morgan Chase & Co

You lifted your EBITDA guidance by about $30 million. If you have to parse that into the Chlorovinyls and Building Products side and the Aromatics side, how would you do that? Is this increase more Aromatics or more Chlorovinyls or both, what?

Paul Carrico

Yes. As a general comment, I think, we would stick with the basics about what Greg earlier mentioned that the Building Products side, we expect sequentially year-over-year to have some improvement. There's not much upside potential beyond that when you look at where the housing market is in all of the reports we're getting out of the homebuilders in both our experiences in Canada, as well as the U.S. So that's kind of in a slough there. Aromatics, based on the current forecast out there, there doesn't appear to be any projected volatility to a significant extent in benzene and propylene, maybe firmed up depending upon what oil and such does. So some of that, I guess, early generation of cash in the first quarter, we hope to hold on to some of that and with the strength in the market, see that continue to be firm for the year. And then clearly, the potential here is for caustic to be in a different pathway than what was thought to be the case when the forecasts were put together by ourselves, as well as the industry out there earlier in the year. So that firmness in both that and PVC supports a different view of where things are for the next, or the remaining months of the year versus where we were earlier this year.

Jeffrey Zekauskas - JP Morgan Chase & Co

When you think about PVC prices going up in April and May, and if you assume that PVC prices do go up by those amounts, what will be the difference between domestic PVC prices and the prices in the offshore markets as you perceive it?

Paul Carrico

It'd still be a differential where domestic would be below the global international markets. So there's some makeup there. In terms of the difference, it varies a lot with the different types of resins we produce and contracts and such, but there's still room for some increase on the domestic side.

Jeffrey Zekauskas - JP Morgan Chase & Co

Okay. To follow up, I think, on Andy's question about you having some advantaged ethylene, over the next 12 months, does any of your advantaged ethylene contracts expire?

Paul Carrico

We have some volumes changing, but we really don't throw out the numbers in terms of what those amount to, the total effect. And there is always still the opportunity to have those volumes replaced with other volumes that work for us just as well, so it would be early to speculate on all that.

Jeffrey Zekauskas - JP Morgan Chase & Co

I wasn't asking about the magnitude. I was just asking if there were any significant contracts that expired over the next 12 months that would be material to you?

Gregory Thompson

Yes, I mean, we do have some of the condo crackers, I think, we've said that they expire over the next 2 to 3 years. And some of that starts to happen into next year, Jeff.

Jeffrey Zekauskas - JP Morgan Chase & Co

So the answer to my question is that over the next 12 months, there is an expiration of some of your advantaged ethylene. Is that what you said?

Paul Carrico

There is some slices of it.

Operator

Your next question comes from Bill Hoffman from RBC Capital Markets.

Bill Hoffman - RBC Capital Markets, LLC

Paul, I just wonder if you could walk us through maybe what you're seeing in the Building Products business from month to month, like from March to April, or just sort of generically. Because, I guess, we're not seeing the kind of pick up that you guys are still kind of forecasting at this point.

Paul Carrico

Well, let me drop back. First of all, as you know, the fourth quarter and the first quarter are always difficult to make projections from because they are so materially different in volumes versus the second and third. And so we really try to look at things both in Canada and the U.S. and actually track it on a weekly basis so we're pretty clear about where things are going. And this year, we hoped for more. We were expecting in Canada that it could be down some because of the incentives that were out there last year, and that proved to be the case. And likewise in the U.S., we expected more on the upside because we thought housing might pick up a little bit. So what we've seen, as those things occurred in Canada and in the U.S., it really didn't. And when you look at all that, it's kind of a so-so year. But clearly, there's still the pick up between January, February, and then you start to see March and April business pick up as the spring season kicks in. So there is a material difference in the second quarter, but in the third quarter we project, but it's not going to be the level of satisfaction that we were hoping for at the beginning of the year.

Bill Hoffman - RBC Capital Markets, LLC

Okay. And then, Greg, just question on the working capital. I would assume going into the second quarter, just given the rising prices, et cetera here, you're going to continue to consume cash on working capital, have you guys changed your thoughts on the full year, cash usage in working capital?

Gregory Thompson

Yes, I do expect that, that will happen in the second quarter. So probably could be to the tune of another $20 million to $30 million in the second quarter. So I did, in my comments, I said our free cash flow for the year, I would still -- that's unchanged from our Investor Day guidance where we, admittedly a wide range, where we said $60 million to $120 million of free cash flow. But included in that, I would say that there's probably $20 million to $30 million more of working capital usage than what we expected at the beginning of the year as long as kind of the pricing and the volumes stay up where they are right now. So we'll make up for that through the improved EBITDA performance.

Bill Hoffman - UBS

Okay, great.

Operator

Your next question comes from Charles Neivert from Dahlman Rose.

Charles Neivert - Dahlman Rose & Company, LLC

Two quick questions. One, last year obviously was an extraordinarily strong year for PVC exports. Are you guys seeing similar kinds of volumes so far through the year, year-to-date, whatever data we've got so far, is it moving along at the same kind of clip from a volume perspective?

Paul Carrico

Well, we think so. We haven't participated quite at the same level as last year, just because of where the domestic situation is and some of our planned outages and such. But all things that we can see, particularly when it was pushed by the issues in Japan, have made that market very firm and there's plenty of volume out there to be had, if you got the volume to do it.

Charles Neivert - Dahlman Rose & Company, LLC

Okay, great. And the other question, you talked about a slight or some sort of change in the mix of Building Products, I guess, between Canada and the U.S. Is that something that's going to continue? I mean, is that part of the way you're marketing going forward, that the mix is going to shift more to U.S. sales? Or is that just something that was temporary based on the 2 separate markets moving at different times and in slightly different directions?

Gregory Thompson

Yes, I think it's probably more temporary. We'll have to see how it goes with the mix of business between Canada and the U.S. through the rest of the year though.

Charles Neivert - Dahlman Rose & Company, LLC

Okay. So would it be correct to say that what we saw was a shift sort of toward the U.S. this quarter, but it might shift back to Canada as it, sort of, market gets the stabilization? [ph]

Gregory Thompson

That's right, Charlie. The percentage was a bit higher in the U.S., where we tend to have a little bit lower margins and not quite as rich a mix of business. So I think with weather performing, weather improving, as well as Exterior Portfolio, that will adjust some over time.

Charles Neivert - Dahlman Rose & Company, LLC

Okay. When you've taken on Exterior Portfolio, when you look at their sales, were they predominantly selling into the U.S. and you're introducing it to Canada? Or they were predominantly Canadian and you're going to be bringing more into the U.S.? Or how would you classify those sales going forward?

Gregory Thompson

They have -- their business has always been predominantly a U.S.-based business, and so we're now taking the, as Paul mentioned, what we're doing now is taking some of those different products that they offer and pushing them now through our distribution channels that we have in Canada, which were not available to Exterior Portfolio prior to the acquisition.

Operator

Your next question comes from Roger Spitz from Bank of America.

Roger Spitz - BofA Merrill Lynch

In the 2011 adjusted EBITDA guidance, how much of a FIFO benefit is there in those numbers?

Gregory Thompson

For the full year, you're talking about, Roger? In the $275 million to $295 million. I guess, we haven't broken that out specifically. But I would say generally over the year, that FIFO, and it all depends on what prices are doing, but with the normal seasonality of our business, particularly in a rising price environment, it tends to unwind usually for the full year. So in the second half, you'd see some unwinding of that benefit. So we didn't break that out specifically the way we think about the numbers. But I would say, overall, there shouldn't -- the way we're thinking about it is, not a lot of FIFO benefit by the time to get to the end of the year in that updated guidance.

Roger Spitz - BofA Merrill Lynch

And given your, I guess, newer or more updated view on housing starts in 2011, do you think you might be potentially slowing down any further acquisitions in Building Products unless you see opportunities that are very compelling on the price?

Paul Carrico

Well, our position on acquiring Exterior Portfolio was that it was at a good multiple and good price, and that we expect it to realize those results even in a very poor year when housing is not so great, remodeling is not so great, and yet we still think we'll have those same kind of results. So I wouldn't preclude it, it just depends upon whether we get an opportunity that's what we consider at the low end of the market range for a very low performing operating environment. So no, I wouldn't preclude it, but I wouldn't say it's necessarily going to happen either.

Operator

[Operator Instructions] Your next question comes from Gregg Goodnight from UBS.

Gregg Goodnight

For the first time on the industry, there's some chlorine price increase announcements. I believe the range is $30 to $60 for second quarter. Two questions. Number one, is that increase starting to take hold out in the industry? And number 2, what have you baked into your forecast in terms of chlorine price of, say, direction for this year?

Paul Carrico

Yes, I do understand there's increases out there, and yes, we think some of that will occur. It varies through the year as to how we look at it, so I can't really directly answer your question about for the whole year. But generally firmed up is what I'd say.

Gregg Goodnight

Okay, great. Second question, Exterior Portfolio has had -- traditionally margins a little bit superior to your other fabricated PVC businesses. I was wondering, in the first quarter, how did the margins in that business perform relative to the other portions of the fabricated PVC business?

Paul Carrico

That's not really a good period to look at. The first quarter, not only was it halfway owned by the other company and halfway owned by us, but first quarter is a terrible time to try to analyze the situation for the year. So I'd say, our guidance related to Building Products is consistent for Exterior Portfolio. We expect to improve on last year's results as a general comment.

Gregg Goodnight

Okay. Last question then, the caustic price increase is $60, April; $50, May. I guess, the April increase would be well on the way to being implemented now. Could you comment on how much of that increase is out there and actually being implemented, and then what is your outlook for the May increase?

Paul Carrico

Well, different people applied numbers to different months. So go back, if you would, and clarify which increases you're talking about.

Gregg Goodnight

Well, the second and third increases for the year, not the first quarter increase that we understand was fully implemented. I think, there was $40 in March.

Paul Carrico

Okay, we'll go off number one, $40, number two, $60 and number three, $50. How about that? And I won't speak to the months because everybody's got different contractual agreements on that. But the $60, we're more or less expecting to work its way through the market at the appropriate time. And then we know that there is talk out there of $50 on top of that $100 you talked about. And with the current conditions, there's probably a chance that, that works through the market too. So we'll just have to see how that plays out.

Gregg Goodnight

Okay. So you said, at appropriate time, sooner in the quarter rather than later, I would assume?

Paul Carrico

Sooner in the quarter -- but there's only some announcements out there, so I couldn't tell you on that what the timing would be for sure. It's not universal across the industry, I don't think at this point.

Operator

[Operator Instructions] I show no further questions at this time.

Martin Jarosick

All right. Thanks, everybody, for joining us. And we look forward to seeing you at the various conferences we'll be speaking at in the next few weeks and talking to you about the second quarter in August.

Operator

Ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect.

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